Wednesday, 16 July 2014

The Office for
National Statistics (ONS) has released the latest set of UK labour market data,
mostly covering the three months March to May 2014.

The state of Britain’s
jobs market gets more puzzling by the month. The number of people in work has
increased by a further 254,000 to 30.64 million and the employment rate – the proportion
of the working age population in work – has reached a record equalling 73.1%,
higher than the pre-recession peak, while the unemployment rate has fallen to
6.5% (2.12 million) even though more people are entering the market to look for
work. Full-time employees account for the bulk of the latest increase. Underemployment
(i.e. part-timers who want a full-time job), though still very high, fell by
61,000 to 1.360 million. As well as the overall fall in unemployment, the
number of jobless 16-24 year olds has fallen by 64,000, long-term unemployment
is down 33,000, and the count of jobless people in receipt of Jobseeker’s
Allowance fell by just over 36,000 in May. Meanwhile the level of job vacancies
continues to rise and is now only 48,000 lower than the pre-recession high.

However, whereas
one would normally expect all this good news on jobs to be reflected in bigger
pay increases as the labour market tightens, the annual rate of growth of total
pay for employees in cash terms is still running at only 0.3%, while regular
pay (stripping out the effect of bonus payments) is rising by just 0.7% per
year, the slowest annual rate of growth since comparable records began in 2001,
resulting in an even tougher bite on real earnings and living standards (the
CPI inflation rate was 1.5% at the time the latest pay data were compiled in
May, though the rate increased to 1.9% in June).

The British jobs
market is therefore at present something of an oddity: a record equalling employment
rate, yet with cash pay rises at a record low and a real wage squeeze that is
still biting hard. We should be celebrating an economy clearly on the fast
track back to full employment. But full employment without stronger growth in
pay and productivity is not the kind of full employment to hang out the bunting
for.